Portfolio Update: 2010 Results

Here’s the monthly portfolio update for the BTI portfolio which consists of 2 accounts: a TFSA account and a Non-Registered account.

The TFSA is currently holding the following stocks (December 31 closing prices):

(A Tax Free Savings Account is an account where your capital gains are exempt from taxes)

Market Value: $14,540 + $365 in Cash = $14,905

The Non-Registered account is currently holding the following stocks:

Market Value: $20,075 – Margin Used: $10,054 = NET: $10,021

BTI Portfolio Value: $24,926

YTD Results from January 1 2010

TSX at start: 11,866 @ December 31: 13,443 Change: +13.29%

BTI at start: 12,936 @ December 31: 24,926 Change: +92.68%

M/M Results from December 1 2010

TSX at start: 12,953 @ December 31: 13,443 Change:  +3.78%

BTI at start: 21,549 @ December 31: 24,926 Change: +15.67%

HELOC Portfolio Performance

The HELOC portfolio is basically a non registered account with money borrowed from my home equity line of credit. *Please take note* that this is money I can afford to lose. The impact of losing this money would be equivalent to skipping a lump sum payment on my mortgage for 1 year. I will use the bank’s “Performance” tool for the monthly results because it takes into account deposits and withdrawals. Now that you’ve called me crazy and shook your head, on to the results:

For the purists amongst you, here’s my sector diversification:

For the record, my outstanding balance on the HELOC is still $18,500, so basically I am up about +12,484$ so far if I sell everything at the closing prices above. Just when I thought I hit the peak last month for the number of stocks held in the HELOC portfolio, I registered a new peak in December as more stocks were added and margin use expanded. The situation should be rectified in January as several stocks are close to hitting their profit targets.

Monthly Review

December turned out to be an excellent month with a +15% return on the BTI portfolio. Since National Bank will be following the competition with a $9.95 flat commission per transaction at the end of January, I decided to execute some small transactions to extend my low commission into January. With National Bank 30 trades in a quarter provides low commissions for the following month.

Even-though we have witnessed snow storms and a cold start to winter, natural gas as well as my gas weighted stocks (DEE, PMT, CQE) failed to rally significantly. Note to self: Get rid of the natural gas weighted stocks in January ASAP; keep a low level exposure with parts of Perpetual Energy only. On the other hand, my oil weighted stocks have been rocking and I am expecting the party to carry on into 2011.

Yearly Review

2010 has been a fantastic year, the numbers truly reflect it and I am simply satisfied with the end result. The past year has been challenging but the hard work paid off handsomely. The HELOC portfolio might have done even better if I did not tie up a significant amount of $ in dividend payers. All of these “troops” would have been deployed into combat sectors instead of their “logistical” role. But the logistics are paramount to this operation as the monthly dividends cover any related margin/interest amounts easily.

The numbers turned out to be outstanding in all 3 accounts I am managing. However, I need to remind myself that past performance is not an indicator of future results. This means any emotions such as feeling too confident and underestimating the market should be avoided at all costs as it precedes the fall. Keep the discipline, stay focused and kill any emotions as soon as they appear. This paragraph will appear on every portfolio update because your state of mind is crucial in achieving results. Psych is as important as skill and luck.

Finally, fighting this challenge is such a pleasure that I am looking forward to next year. Here’s to a healthy, challenging and profitable 2011!